24 ~ Sunday, November 23, 1997 — North Shore News

An investment
plan provides
a path to goals

FOR those of you with-
out an investment port-
folio, don’t let the
recent market correction
deter you.

A sound investment plan
can ride out these kinds of mar-
ket fluctuations. The key to
maximizing your investing and
still sleeping at night is to have
money in all major assct classes.

; What exactly is an invest-
ment plan? It’s a consideration
of your moncy goals and needs
at this time in your life. Far
from being just another finan-
cial burden, an investment plan

‘is just the opposite — once in
. place, it allows you to feel that

“your money situation: is secure

and your goals, on track. Think

of it asa sort of blueprint to put:

. your financial “house” in order.
First off, do you even need

ene? Consider your present

* financial situation. Do you have
a regular savings plan for unex-
pected expenses? Do you have
several short and long term

‘investment plans to accommo-
date, say, your children’s educa-
tion, an inheritance, and your
retirement? Ifyou keep answer-
ing no, it’s time for planning,

Start by summarizing your

short and long term investment
goals, Short term, for cxample,

- Might be to save for a car. Long

- term might be planning for an
early retirement. Once you've
nailed down your goals and pri-
.Orities, the next step is to deter-
mine what kind of investor you
‘are by considering why you
want to invest, for how long,
and in what risk category.

“

north shore news

&» BUSINESS
Ride out financial storm

A financial planner can help
vou understand your invest-
ment needs by zeroing in on
three important factors and
then match your goals with the
appropriate investment vehicle:
#8 vour risk tolerance;

@ vour purpose for investing
(and the time-frame);

@ your performance expecta-
tions,

Let's look at your risk toler-
ance. Is security the focus of all
your financial “decisions? If the

idea of fluctuating return or

principle value gives vou the
willies, then vou may be a fow-
risk investor, The low-risk
investor is perfectly satisfied
with regular reeurns and a pre-
dictable portfolio, even if it
means a “low and slow” build-
ing of wealth. Good investment
vehicles for you would be
deposit-based: savings
accounts, term deposits, GICs,
and Canada Savings Bonds.
These days, there are very cre-
ative investment opportunities
in the lower-risk category.

If that first description did-
n't sound like you, you may be
higher on the “risk-o-meter”
— a moderate or higher risk
investor, A moderate risk
investor is someone prepared
to accept some degree of risk as
a condition of potentially high-
er returns. Your kind of portto-
lio is a combination of guaran-
teed investments (with average
returns) and some other
growth-oriented investments
such as blue-chip stocks or
equity mutual funds that have
the potential for higher recurns.

Now we come to the high-
er-risk investors — those will-
ing to maximize the investment
scene. Your key motivator is
capital growth. You're willing
to take greater risks for the
potential of greater returns.
And what does your portfolio
likely contain? Equity and

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growth mutual fusds, forcign
mutual funds, and stocks.

Of course, this profile is
somewhat artificial. You may in
fact be willing to take higher or
lower risks tor different “pock-
ets” of money, depending on
your investment purposes. That
is the next factor to consider:
your purpose for investing. |

The nature of your invest-
ment goal will influence the
time that money is tied up in
investments. If, for example,
one of your goals is to buy a
new car in a few years, your
investment time-frame is fairly
short (less than five years).
Short term investment vehicles
vou might consider include sav-
ings accounts, term deposits,
GICs, savings bonds, and
money market and income-
based inutual funds.

If you have a longer-term
goal — using the next cight to
10 years to save for your child’s
education — consider using
income investments such as
term deposits, GICs, and bond
funds. If one of your goals does
Not require immediate access to
inoney — a long-ternt invest-
ment of 10 years or more —
you could put your money into
growth investments (stocks or
equity-based mutual funds) or
lopser-term bonds.

Your third consideraticn for
setting up 9. financial plan is

performance. This is really tied
in with the time-frame of your
investment and your expected
rate of retum. Remember the
golden rule: the longer the
time-frame, the more impor-
tant return is.

Equity. investments tend to
perform better over time. For
cxample, if you had $10,000 to
invest and you put yours in a
guaranteed investment at 6%
and your friend put hers in a
higher-risk vehicle at 9%, after
25 years, vour friend would be
passing vou in the fast lane —
the difference in vour original
investment of $10,000 would
now be 98%! You would have
$42,918 and your friend
$86,230. So vou can sce now
how the type of investment you
choose is ted in with your risk
tolerance, your investment
time-frame and the expected
performance of that invest-
menc.You might change your

rioritics or ume-frames and
become more tolerant or Jess
tolerant of risk as your financial
picture changes. The investor
profile is not meant to classify
you permanently — it’s a tool
to assess your “comfort zones.”

Doug Smith is VP,
Investment and Insurance
Services, North Shore Credit
Union. For more information
on financial planning, contact
a NSCY North Shore office.

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